Solutions Brief | August 21, 2013

As of June 2012, unemployment rates in the United States reached 23.7 percent for teenagers and 16.5 percent for youth aged 16 to 24. For some minority youth aged 16 to 19, the situation is even more dismal. African Americans in this demographic have an unemployment rate of 44.2 percent, while the rate for Hispanic/Latino youth is 31 percent. According to one recent study, “the substantial drop in teen employment prospects has had a devastating effect on the nation’s youngest teens (16-17), males, Blacks, low income youth, and inner city, minority males.” These statistics may only tell part of the story, as they fail to take into account those who have given up their job searches entirely and may not include youth who are experiencing homelessness.

Youth face a number of barriers when seeking employment due to their age, inexperience, perceived immaturity, and lack of education and skills. During an economic downturn these challenges are heightened since fewer jobs are available and employers have a wider range of candidates from which to choose. Youth unemployment statistics indicate that certain subpopulations face even greater barriers due to factors including race, sex, and socioeconomic status. This brief will explore the negative outcomes of youth unemployment, the costs to society, and lessons learned from federal youth employment programs about successful program components to help disconnected and disadvantaged youth overcome these challenges.

Impacts of Youth Unemployment

The negative outcomes associated with unemployment might seem obvious, but the reality is worth stating: Unemployment increases stress and unhappiness, and heightens the risk of malnutrition, illness, mental stress, loss of self-esteem and depression. It can reduce the life expectancy of workers and increase the probability of poor physical health outcomes, such as heart attacks, in later life. Long term unemployment creates numerous disadvantages for those seeking employment. For youth in general, unemployment fosters feelings of helplessness; for youth aged 17-25, unemployment during a recession can adversely affect their beliefs about life chances. Unemployment also increases the probability of being unemployed later in life and decreases the potential for lifetime earnings.

In addition to these poor outcomes, unemployment inhibits a youth’s ability to access and maintain housing. The impact can be both short and long term. In the short term, insufficient income leads to an inability to afford rent, security deposits, application fees, and other corresponding costs such as utilities and insurance, which some rentals require. Long term impacts include potential evictions, which can hinder future housing opportunities. Additionally, long term unemployment can lead to physically and mentally disabling conditions and other barriers to employability, which might result in episodes of homelessness later in life.

The costs to society are equally detrimental. As the period of unemployment increases and youth become increasingly idle, they “are not contributing to the economic welfare of their country." In fact, they are often a detriment to the economic welfare - they are not saving money; they often have to be financially supported by their families; they are not contributing to society as taxpayers, and they are more likely to need public assistance, which requires increased government spending. Finally, a number of studies have shown strong correlations between youth unemployment and criminal activity. According to one, “higher [youth] unemployment is associated with increases in burglaries, thefts and drug offences.” Another study found “that employed youth are less likely to be engaged in property crimes.”

The Nexus of Education, Criminal Activity, and Youth Unemployment

The correlation between criminal activity and youth unemployment is worth exploring in greater depth, particularly the nexus with education. In 2011, H. R. 683, or the Urban Jobs Act (UJA), was proposed “to reduce the disproportionate incarceration of minority youth and to prepare eligible young adults for entry into the world of work by providing a comprehensive set of services that includes job training, education, and support services.” The Congressional findings in the second section of the proposed legislation enumerate the hardships faced by minority youth. Of particular relevance are the following:

The labor force participation rate for persons without a high school diploma is 20 percentage points lower than the labor force participation rate for high school graduates;

High school dropouts from the class of 2004 will cost the Nation more than $325 billion in lost wages, taxes, and productivity over their lifetimes;

Over his or her lifetime, a high school dropout earns, on average, about $260,000 less than a high school graduate, and about $1 million less than a college graduate; and

Approximately 75 percent of State prison inmates and 59 percent of Federal prison inmates have not completed high school. Increasing the high school completion rate by 1 percent for all men ages 20 to 60 would save the United States $1.4 billion annually in reduced costs associated with crime.

Following this train of logic, youth unemployment is correlated to increased criminal activity, which often leads to incarceration. Incarceration can cause youth to drop out of school. Inadequate education and “involvement in crime reduces subsequent employment prospects and consequently increases the probability of participating in crime.”

The costs of this cycle on society are tremendous, even beyond lost wages and tax contributions. While a youth is incarcerated, the average cost to states is approximately $240 per day, per youth. In a study that compiled data from 28 states that self-reported their youth incarceration statistics, the combined daily expenditures of those states was found to average $7.1 million per day, or approximately $2.5 billion per year. The same study found that the nationwide costs in 2007 were approximately $5.7 billion for 64,558 youth, or around $88,000 per youth. For perspective, the Department of Education estimates that there are 49 million elementary and secondary students in the country, and the Census reports that states spent $254.1 billion dollars on education in 2010. While annual incarceration costs creep towards the six-figure mark per youth, annual education expenditures are only about $5,000 per student.

After being discharged, formerly incarcerated youth face the whole gamut of employment barriers and may be at an increased risk of experiencing an episode of homelessness due to a fractured family connections, unemployment, and inadequate discharge planning. Homelessness carries additional societal costs, including reliance on public benefits, utilization of resources like shelters and housing programs, greater challenges in securing employment, and an increased likelihood of participation in risky behaviors, which can lead to re-incarceration. Addressing all these challenges requires innovative alternatives to intervention, but equally necessary are programs and policies that keep youth connected to their families and schools, and provide them with the necessary tools and assistance to succeed in employment.

The American Recovery and Reinvestment Act of 2009

Fortunately, previously implemented youth employment initiatives provide a solid basis for working towards solutions to these challenges. In 2009, the American Recovery and Reinvestment Act (the Recovery Act) provided $1.2 billion in additional funding for summer employment initiatives under the Workforce Investment Act (WIA) for youth nationwide. The one-time investment had the dual purpose of stimulating local economies while providing meaningful employment opportunities for disadvantaged youth. The original WIA programs had three eligibility criteria. Youth must:

Be between 14 and 21 years old;

Qualify as low income by WIA standards; and

Meet one of six barriers to employment, being:

A school dropout;

Deficient in basic literacy;

A homeless, runaway, or foster child;

A parenting or pregnant teen;

An offender; or

Someone who needs help completing an education program or securing and maintaining employment.

The Recovery Act made two modifications for the summer program. First, the age criteria were extended, giving “eligibility to youth up to 24 years of age.” Second, ‘achievement of work readiness goals’ would be the only indicator used for measuring the performance of the programs. In an effort to serve the most disconnected populations, at least 30 percent of the funding had to be used for out-of-school youth.

Over the course of the summer, more than 355,000 youth were enrolled in the program. Of those, 36 percent were out-of-school youth. States also succeeded in enrolling “a diverse array of youth, in terms of gender, race, education level, and age.” The table below highlights the level of diversity amongst participants. In addition to employment, 7.3 percent of the participating youth also received education services, which included remediation, recovery of school credits, and GED preparation. Overall, states reported that 74.8 percent of participants increased their work readiness skills and 82.4 percent completed their summer work experience.

The Department of Labor funded two studies to evaluate the implementation and potential of the summer employment programs. These studies identified the challenges the communities faced and the solutions they utilized to overcome them. Findings include:

The benefits of providing vouchers for clothing and transportation;

The importance of integrating supportive services for service-receiving youth;

The need for training for employment readiness, budgeting, etc.;

The value of liaisons between youth and employers (similar to the ‘Master Lease’ between landlords and those previously experiencing homelessness);

The importance of building relationships with local community colleges and other educational institutions to enhance opportunities and leverage the work experience;

The benefits of educating youth about their rights and responsibilities;

The benefits of educating employers about rights, responsibilities and opportunities;

The ability to get ‘buy-in’ from employers by emphasizing the benefits of investing in the local community;

The value of promoting mentoring and the active modeling of workplace behaviors; and

Leveraging community and public-private partnerships.

Moving forward, the challenge is to utilize this knowledge and experience to build enduring programs that provide youth with opportunities to succeed and break the cycle of unemployment, poverty, and incarceration.

Conclusion

The implications of youth unemployment extend beyond whether a particular youth (or subset of youth) does or does not have a job. The reality for some youth is that lack of opportunity has created a sense of despondency and hopelessness about future prospects. Investing in youth to facilitate workplace success and advancement by keeping them in school, out of prisons, and adequately prepared for employment is crucial beyond the fiscal implications of such a strategy. Without these investments, youth cannot plan for their own futures because they may not believe a promising future is even possible. If we allow a large portion of our population to become disconnected in their youth, we will all face the consequences later if they face continued challenges including homelessness and housing instability.